The other side of the retail apocalypse

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It is no secret that the UK retail sector has experienced serious and growing problems in the decade since the crash of 2008. For most of the period, mainstream business journalists were able to pass off the lack of growth on the High Street by blaming the Internet. While it is true that online sales have continued to grow, however, they are insufficient to account for the combined losses on the High Street. Since 2016, journalists have also been able to mobilise the fiction of “Brexit uncertainty” to explain falling sales (this is a plausible explanation for falling investment and for large purchases like houses and new cars, but it stretches credibility to claim that people didn’t buy winter clothing in 2016/7 because Britain was due to leave the EU in March 2019).

Prior to 2018, the “retail apocalypse” was limited to a narrow section of the High Street, including restaurants and fashion outlets. But in 2018, something began to change. The pace of insolvencies picked up and began to impact on the commercial real estate sector. Then in September we experienced a massive drop in car sales. And while this was dismissed as an anomaly resulting from falling diesel car sales and European environmental regulations, the promised rebound never happened. Vehicle sales continued to fall in October, November and December. (The diesel sales narrative never really worked because it assumed that the alternative would be to give up driving altogether rather than do the more obvious thing and buy a petrol or electric alternative).

Particularly poor non-food retail sales at the end of 2018 – when around 40 percent of annual sales are normally made – have finally obliged (mostly London-based) business news outlets to acknowledge what has been painfully obvious to those of us living outside the “Westminster Bubble;” that a decade of austerity policies, coming on top of decades of eroding living standards, has shrunk our collective discretionary income (the cash we have left over after the bills have been paid) to the point that we can no longer afford to support a consumer economy.

One reason why journalists may have been reticent about personal incomes is that in polite British society (i.e. among the affluent class) it is a serious faux pas to mention money. Moreover, it is particularly impolite to draw attention to the fact that one’s relatives, friends or neighbours are “financially embarrassed” (i.e. skint). This is less apparent among the growing army of Britain’s working and precariat classes; whose incomes are usually in the public domain anyway (it is simple enough to Google the pay rate of a Grade 3 local government worker or the benefit rate for someone on Universal Credit). Only among the salaried affluent classes do we have difficulty discovering someone’s income.

Generally, of course, unadjusted incomes have been relatively stable for the last decade. This has allowed considerable erosion of living standards as a result of inflation; so that the adjusted average wage is worth just two-thirds of its 2008 value (the median wage – the half way point on the income ladder – is now more than £6,000 less than the average). Add to this a decade of stealth taxation (including, for example, big rises in energy prices as the cost of uprating the electricity grid has been added to people’s bills) and you have the makings of a crisis in the discretionary income of the affluent class.

Not that members of the affluent class are ever going to acknowledge that they can no longer afford the lifestyles they enjoyed a decade ago. Instead, polite euphemism is deployed to maintain the fiction that lifestyles downgraded to account for less discretionary income are, in fact, virtuous. With this in mind, we can ask what should be an obvious question for business journalists – if internet sales do not fully account for the decline in High Street sales, what does?

For the majority, the answer to this question is an austerity-driven “Make do and mend.” For the affluent class, however, a new brand of environmentalism is emerging as a moral cover for declining incomes. The online statistics portal Statistaputs it this way:

“With rising concern about the environmental and ethical costs of the consumer goods industry worldwide, second-hand retail has seen growing importance over recent years. In the United Kingdom (UK), there are a total of 3,994 stores specialized in selling second-hand goods and it is an industry employing an average of 33 thousand people. During 2017, sales in these stores saw a 7.3 percent rise in value, a notably larger increase than the preceding year at 4.9 percent.”

Like the majority of ordinary folk before them, Britain’s affluent class has been obliged to turn to second hand shops to offset its declining discretionary income. Not, of course, that anyone (myself excluded) would be so uncouth as to refer to this type of shopping as “second hand.” So, instead, we have been treated to the growth of “preloved” and “environmentally friendly” outlets targeting financially embarrassed but socially concerned formerly-affluent shoppers. As Regina Henkel at Fashion United writes:

“Second-hand is an ambassador for sustainability. Manufacturers are getting involved in second-hand goods for this reason, not only with the aim to collect and recycle them, like Inditex or H&M, but also to stress the value of clothing as a resource and counteract the common disposable mentality of the fast-fashion industry.”

By making shopping second hand socially acceptable in polite society, a growing online and High Street used goods sector has had a similar impact on traditional High Street retailers as online outlets such as Amazon and E-Bay. As Charlotte Rogers at Marketing Week notes:

“While there are no specific figures available for the UK market, British consumers are showing a trend for rejecting the trappings of fast fashion in favour of resale clothing. Furthermore, as retail heavyweights such as House of Fraser, Marks & Spencer and New Look pull back from the high street, the opportunity grows for online resale to capture UK consumers’ attention.”

House of Fraser has gone into liquidation since this was written, while Marks & Spencer and New Look are struggling to avoid bankruptcy and may be forced to close stores in 2019.

Several other sectors of the economy seem to be following the same trend. One reason car sales are down, for example, is that younger urban dwellers are “choosing” (i.e. struggling with student debt and rising prices) to patronise Uber and Lyft as a “sharing” alternative to owning a car. Nor should we overlook the fact that that other prominent trend among the young – eating vegan – is often significantly cheaper than eating meat – the elderly, those who grew up before or during World War Two, will remember a time when being a vegetarian was the norm and when meat was considered an expensive luxury.

It was always far more likely that an economic decline and fall would have a far better impact on the environment than a whole host of (usually over-ambitious) policies dreamed up by corporations and governments. Not being able to afford to burn fossil fuels, that is, was always going to be more effective than setting government carbon reduction targets that would simply be ignored. In this sense, we should celebrate the fact that the affluent class is now catching up with the majority in feeling the impact of a declining economy.

The downside, however, is that we are likely entering an end-run production scenario. That is, we can only continue to buy “preloved” goods if enough people somewhere else are prepared to buy them new. But since we have traditionally depended upon the affluent class to purchase the new goods, and since more of them are going second hand, we are likely at the start of a cascading collapse into the supply chains. This may not be obvious to the casual observer, simply because there is little difference in footfall between a thriving retailer and a collapsing one. It is at the margins that profitability is maintained, and it is at the margins that we are seeing the shift to second hand. Ultimately, that means that the importers of new goods, the transport companies that move them, the factories that make them, and the industries that supply the raw materials are also going to fall like dominoes. The problem then is that we have no local alternatives… which is another way of saying that the supposedly “sustainable” preloved and sharing economy is anything but.

As you made it to the end…

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